Report: Scotland’s services sector potential in global markets

A new report commissioned by the Scottish Government and delivered by the Fraser of Allander Institute in partnership with Prosper highlights the central role of high-value, knowledge-intensive sectors – ranging from financial services and scientific research to digital technology and creative industries – in Scotland’s international economy, and the potential to grow in markets including the Saudi Arabia, Brazil, India, and China.

The report finds that Scottish services exports were worth approximately £16 billion in 2023, around twice their nominal value in 2008.

While mature markets in Europe and North America remain central, growing demand in China presents expanding opportunities for Scottish expertise. China currently stands among the top 10 export destinations for several UK service sectors. It accounts for 3% of UK information services exports, 2% of financial services exports, and 1% of both insurance and research and development (R&D) exports.

In science and research, China’s increasingly active discovery and licensing environment creates appetite for specialist pre-clinical expertise, advanced therapy testing, and university-linked research collaborations. Similarly, in financial services, digital technologies, and energy-related engineering, China’s market scale offers substantial opportunities for Scottish asset management, fintech, cloud solutions, and offshore energy expertise.

Despite this potential, accessing the Chinese market requires navigating significant non-tariff barriers (NTBs) that operate behind the border. Unlike traditional tariffs, these constraints centre on evolving regulatory environments, restrictions on cross-border data flows, and local establishment requirements.

In digital and tech services, exporters encounter data localisation mandates and regulatory scrutiny regarding source code disclosures and algorithm registrations. Meanwhile, Scottish creative industries—such as video game developers and digital media firms – face market access challenges including strict content approval processes, censorship rules, and “first-to-file” intellectual property (IP) frameworks that heighten bad-faith registration risks.

Professor Mairi Spowage, director of the Fraser of Allander Institute, said: “Scotland has an internationally competitive base of knowledge, expertise and specialist services.

“This report shows that the opportunity is substantial, but success depends on more than demand alone. Reducing regulatory friction, improving mutual recognition and helping firms build trusted relationships in key markets will be essential if Scotland is to convert its strengths into sustained export growth.”

To successfully convert market opportunity into sustained export growth, Scottish businesses are adapting their delivery structures. The report indicates that firms commonly respond to market access barriers by forming partnerships with established local entities, opening in-market offices, or adapting service delivery to meet domestic standards.

Policy leaders and industry experts emphasise that capturing growth in China requires moving from reactive adjustment to proactive, structured engagement. Building trusted institutional partnerships, embedding robust IP safeguards in trade dialogues, and empowering professional regulatory bodies to foster mutual recognition will be essential. By navigating these regulatory landscapes, Scottish businesses can anchor high-value jobs and productivity at home while expanding their economic, academic, and cultural presence in China and other growing markets such as India and the Gulf states.

Sara Thiam, Prosper chief executive, said: “Scotland has many strengths in international trade, with products and expertise valued by customers around the world. Exports from the services sector deserve greater attention, making this report particularly timely.

“The services economy is highly innovative, supports skilled jobs and drives growth across Scotland. While service exporters are less exposed to tariffs, they still face regulatory, mobility and administrative barriers that can limit access to markets and constrain growth.

“The Scottish and UK governments must better understand these challenges and ensure trade support reflects the needs of service exporters. Services exports should also be given equal priority to goods in free trade negotiations. By reducing barriers and improving market access, we can help more Scottish firms turn global ambition into commercial success.”

Tom Arthur MSP, Minister for Business and Fair Work, said: “Services account for over 40% of Scotland’s exports and support hundreds of thousands of high-value jobs.

“The Fraser of Allander Institute report makes clear that there are genuine opportunities in building skills and innovation, improving export support for businesses and taking a more joined-up approach to trade policy and delivery. It will help us better understand the international trade barriers that Scottish businesses face. We will study these findings carefully and set out our response in due course.”